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Medical Device Company Nephros, Inc. Credits State’s NOL Program with Fueling Growth

TRENTON, N.J. (May 10, 2018) – With support from the New Jersey Economic Development Authority (EDA), medical device maker Nephros, Inc. has developed and commercialized water-filtration systems designed to decrease the incidence of infectious diseases in hospitals and dialysis clinics. More than 500 facilities in the United States currently use the South Orange-based company’s innovative technology.

Founded in 1997, the company, whose name means “kidney” in Greek, originally focused on creating blood-purification technologies for patients with end-stage renal disease (ESRD). Nephros’ original proprietary hemodiafiltration (HDF) system is used in conjunction with standard hemodialysis machines to provide HDF therapy to ESRD patients.

In recent years, the company has shifted its short-term focus to developing water filters for infection control in medical facilities, specifically designed for use at sinks, showers and ice machines. Nephros executives indicate that even potable water has the potential to contain microbiological contaminants that can negatively impact immunocompromised patients.  Since pivoting its focal point to infection control in 2015, the number of hospitals using Nephros’ products has swelled from 50 to over 500.

The company has seen significant growth in recent months, aided by its participation in the New Jersey Technology Business Tax Certificate Transfer (NOL) Program. Last year was the first time Nephros participated in the program.

Momentum from cash infused through the NOL Program supported the acceleration of Nephros’ hiring plan and the lease and build-out of the company’s new 8,000-square-foot facility in South Orange.  It also helped attract new investors, from whom Nephros obtained nearly $3 million in recent weeks. Since January 2017, the company has grown from nine to 14 employees. Last year, Nephros’ sales were approximately $3.8 million, up 65 percent over 2016.

“To see New Jersey companies like Nephros flourish as a result of our NOL Program reinforces the kind of impact that smart, targeted investments in growing companies can have for New Jersey’s economy,” EDA Chief Executive Officer Tim Sullivan said. “It also underscores why Governor Murphy is committed to fostering the development of the innovation economy.”

The NOL Program enables eligible technology and life sciences companies to sell New Jersey net operating losses (NOLs) and unused research and development tax credits to unrelated profitable corporations for cash, which can be used for working capital or to fund research. The NOL Program is administered by the EDA and the New Jersey Division of Taxation within the State’s Department of Treasury.

Unprofitable technology and life sciences companies have until June 30 to apply to participate in the 2018 NOL Program. The application and a list of benefits and requirements can be found at http://www.njeda.com/nol.

“The NOL Program allowed us to sell not only our current NOLs, but also those we sustained in previous years,” explained Nephros Chief Financial Officer Andy Astor. “The NOL Program was an excellent bridge to our goal of achieving cash flow break-even in 2018.” Astor added that the program provided the funding needed for operational self-sufficiency, without diluting the company’s investors or adding debt to its balance sheet.

@NJEDATech spoke to Astor about Nephros’ experience in New Jersey and its plans for the future:

Why did Nephros choose to grow in New Jersey?
Nephros was originally a spin-out from Columbia University, just across the Hudson River. The company moved to New Jersey in 2008 to draw on the extensive biotechnology and medical device talent base in the state, and to take advantage of New Jersey’s somewhat lower operational cost levels. Over the past couple of years, Nephros has grown substantially, and we continue to find New Jersey a reliable provider of talent at rational cost levels.

How did you benefit from the funding provided through the NOL Program?
The NOL Program was a huge benefit to Nephros. It took the place of a fundraising round for us, providing the operating capital we need for the foreseeable future. Without it, we would have needed to bring in additional capital by either diluting our existing investors or adding debt to our balance sheet.

What do you consider Nephros’ biggest success to date?
I would say our pivot over the past two to three years to a medical water filtration company. We used the advance filter technology we developed in our dialysis business to build filters for the infection control market within hospitals and are seeing 50 to 100 percent annual growth in that business. And I’ll mention again that the EDA’s NOL Program was instrumental in enabling that change.

What’s on the horizon for your company?
Interestingly, with the success of our filter business, we are able to return some of our focus to the dialysis business, with a next-generation HDF product. Stay tuned for more on that front.

The EDA offers a multitude of resources to help technology and life sciences companies grow and thrive in New Jersey.
To learn about these resources, visit 
http://www.njeda.com/tls and follow @NJEDATech on FacebookTwitter and LinkedIn.

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